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Pershing Square’s Bill Ackman might well have given a few desperate Americans an early Christmas gift last week when he took on nutritional supplement company Herbalife in a three-hour presentation at a special session of the Sohn Conference in New York City.

NEW YORK - OCTOBER 01: Pershing Square Capital Management CEO Bill Ackman speaks at the New York Film Festival premiere of Sony Pictures Classics' 'INSIDE JOB' at Alice Tully Hall on October 1, 2010 in New York City. (Image credit: Getty Images North America via @daylife)

No, I am not discussing Ackman’s now famous short of the company, based on his contention that Herbalife is no more than a pyramid scheme, doomed to eventually run out of financial options. I’m not a stock analyst and can’t comment on such things.

Instead, I would like to acknowledge Ackman’s service in pointing out exactly how hard it is for a Herbalife distributor to earn anything resembling a living wage. This is something, I should say, very few of the journalists and stock analysts arguing about the various merits (or lack thereof, depending on their view) of Ackman's case against Herbalife have bothered to acknowledge.

Multilevel marketing firms like Herbalife recruit new sales associates by holding out the lure that selling their products offers a way to “financial freedom.”
Signing on as a sales team member for such a company is not, however, like taking a job at Wal-Mart. There is no set schedule, no fixed hours and, thus, no hourly pay. Instead, sales associates work for themselves. They purchase and market Herbalife products, attempting to sell the stuff to friends, relatives, and acquaintances. The more they offload, the bigger the paycheck.

Unfortunately, most Herbalife recruits are not particularly good at retail, or have less than prosperous pals. According to Ackman and Pershing Square analyst Shane Dinneen, more than ninety percent of Herbalife’s salesmen and saleswomen will earn not even one penny in the way of gross compensation. As for those promised riches, less than one percent Herbalife distributors will ever earn $300,000 or more.

So how are a few so successful when the vast majority Herbalife salesmen and saleswomen will fall flat on their financial faces? According to Ackman, the real money in peddling Herbalife products is not in attempting to market such things as the Express Meal Bar to retail customers. Instead, it is in selling the idea of selling Herbalife products to others -- all of whom will pay a commission to their recruiter on any sales they make, whether to themselves in the way of start-up costs or others.

Herbalife’s most successful ambassadors are, in other words, as much in the business of selling financial hope as much as they are in the business of selling nutritional and weight loss supplements. Herbalife does this, Ackman says, by targeting the financially vulnerable and unsophisticated, including stay-at-home moms, minorities and college students.

Ackman's critique of Herbalife's sales practices is not a new one to anyone following the mulitlevel marketing industry. There are websites such as Pink Truth, Income at Home Exposed and Pyramid Scheme Alert devoted to highlighing such claims. Moreover, fellow multilevel marketing companies Mary Kay Cosmetics or ViSalus, another purveyor of weight loss and nutritional supplements, have both been the subject of scathing take-downs by journalists within the past few months.

Ackman's high profile, however, is all but certain to bring renewed attention to the business practices of such multilevel marketing companies. He's now debuted a website designed to discourage anyone from seeking their future fortune via Herbalife sales. He claims his ultimate goal is not to profit from his short position – he’s announced he’s giving all money he earns from it to charity – but that he would like the federal government to shut Herbalife’s 32-year-old nutritional supplement business down. “A lot of people have been harmed here,” he said in an interview with Bloomberg last week.

Needless to say, Herbalife is crying foul, and Herbalife Chief Executive Officer Michael Johnson says he will respond to what he describes as “blatant market manipulation” by Ackman in early January, 2013.

So what would I like for Christmas? From Johnson, I’d like to see a well-thought out plan to help out all those struggling would-be Herbalife sales distributors. From Ackman, perhaps his website could begin to highlight not just Herbalife, but other multilevel marketing companies that appear to prosper by appealing to financially vulnerable people. And from the financial media reporting on this imbroglio? I'd like to see more attention paid, not just to Herbalife's future stock market prospects, but to all the people who have attempted to make a living marketing Herbalife products.